Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

In July 2011, the Financial Stability Oversight Council, or FSOC, adopted rules pursuant to Section 804 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The statute and rules provide FSOC the authority to designate a financial market utility, or FMU, as systemically important.  The designation of an FMU as systemically important by FSOC subjects the designated FMU to the requirements of Title VIII of the Dodd-Frank Act.  The final rule only addresses the designation of FMUs.  FSOC expects to address the designation of payment, clearing, or settlement activities as systemically important in a separate rulemaking.

The rule as adopted uses a two-stage process for evaluating FMUs prior to a vote of proposed designation. The first stage consists of a largely data-driven process for FSOC to identify a preliminary set of FMUs, whose failure or disruption could potentially threaten the stability of the U.S. financial system.  In the second stage, the FMUs identified through the first stage of review will be subject to a more in-depth review, with a greater focus on qualitative factors, in addition to other institution and market specific considerations.

In a meeting on December 21, 2011, FSOC advanced certain FMUs from stage one to stage two of the evaluation process.  The meeting minutes do not specifically identify the FMUs under consideration, but only reference a notification letter to be sent to the FMU.  So if you might be a systematically important FMU, you know who you are.

Check frequently for updates on the Dodd-Frank Act and other important securities law matters.

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